“It is important to create awareness and build the capacity of government officials. We need to provide evidence they can use. It is a long journey but by working with persistence and patience we can finally see the good outcome in our new tobacco control law in Lao PDR.”

Southeast Asia Tobacco Control Alliance

Background

Lao PDR has a population of 6.6 million people and is one of the poorest countries in the world. More than 824,000 adult smoke and tobacco use claims about 7,000 lives each year. It is estimated that Lao PDR spends about USD 428 million or 2.3% of its 2017 Gross Domestic Product (GDP) on tobacco-related healthcare costs.

In 2001, Imperial Tobacco signed a 25-year Investment License Agreement (ILA) with the Lao government to privatize the country’s state-run tobacco monopoly into a joint venture, Lao Tobacco Ltd.[i] Imperial Tobacco is the majority owner of the joint venture. The ILA keeps cigarettes cheap because it is skewed to benefit Imperial and provides several benefits including a cap on taxes on cigarettes.[ii] Through this agreement, between 2002 and 2019, Imperial has legally avoided paying $142.9 million in taxes. This company controls 79% of cigarette market in Lao.

In 2006, Lao PDR ratified the WHO Framework Convention on Tobacco Control (WHO FCTC) and in 2009 passed the Tobacco Control Act which covers some basic aspects of tobacco control but leaves some loopholes. The joint venture with the government enables the tobacco industry access to senior government officials and puts government officials in a position to protect the tobacco business which is a violation of WHO FCTC Article 5.3. Regular documentation of industry interference in Lao’s tobacco control efforts and creating awareness of government officials on Article 5.3 bore fruit in 2021.

End of 2021, the Prime Minister signed the amended Tobacco Control Act into law which contains elements of Article 5.3 incorporated into the law.

Tobacco Industry Tactics to Undermine Tobacco Control

Since the ILA was implemented, the LTL have declared the production cost lower than LAK 1,500 since 2001. Hence, they enjoyed paying the low excise tax rate of 15% instead of complying with the law by paying the excise tax rate of 60%. Lao has the lowest tobacco tax burden as a percentage of cigarettes retail price (16-19.7%) among the ASEAN countries as cigarettes continue to remain cheap. Additionally, Imperial has not abided by Lao’s tax law and has refused to pay specific tax of 600 Lak/pack and dedicated tax to Lao’s Tobacco Control fund.[iii]

An immediate outcome of the contract is that Lao PDR is in direct conflict with implementing the WHO FCTC, particularly Article 6, where the joint venture is resulting in a net loss to the Lao government and people.

The Tobacco industry is viewed as a stakeholder in tobacco control and makes recommendations on tobacco control such as a minimum price on cigarettes which had no impact on reducing tobacco consumption. The proposal was made through the Ministry of Industry and Commerce and approved by the same Ministry although the Health Ministry opposed the proposal. [iv]

The industry interfered in the implementation of pictorial health warnings on cigarette packs which was delayed by six months because it appealed to friendly ministries (e.g., Ministry of Industry and Commerce) to intervene on its behalf.

Documenting Industry Interference and Creating Awareness of Officials

Since 2014, advocates in Lao have annually documented instances of tobacco industry interference, benefits given to the industry and unnecessary interactions through Southeast Asia Tobacco Control Alliance’s Tobacco Industry Interference Index.[v] Findings of the indices were regularly shared with the Ministry of Health officials. In December 2018, the Ministry of Health issued a Code of Conduct for the health sector (in government) to provide guidance on interacting with the tobacco industry.

The subsequent indices in 2019, 2020 and 2021 recommended preventive measures to extend the code of conduct for the health sector to be extended to apply to the whole of government. Technical assistance on good practices from other countries that have incorporated measures to protect the bureaucracy into their legislation were also shared with the Health Ministry.

Exposing industry interference is crucial as industry’s quiet interaction with pro-business agencies and ignoring Article 5.3 obligation has resulted in cheap cigarettes and hooking more poor Lao people to tobacco.

Successful Outcome - Article 5.3 is Included in Tobacco Control Law

In December 2021, the Prime Minister signed the amended Tobacco Control Act into law. The amended Tobacco Control Act 2021 is a stronger law and includes provisions on Article 5.3. It requires the state to protect health policies from all forms of interference from the tobacco industry. Government officials are prohibited:

• To be involved in the tobacco industry, except in cases where it is necessary on the basis of transparency, openness and accountability according to the Laws;
• To recruit the representatives of tobacco companies, tobacco business operators to be members or consultant in the Tobacco Control Committee;
• To directly or indirectly accept any sponsorship and support from tobacco companies, including accepting the corporate social responsibility of tobacco companies for commercial purposes.

About Southeast Asia Tobacco Control Alliance (SEATCA): SEATCA is a multi-sectoral non-governmental alliance promoting health and saving lives by assisting ASEAN countries to accelerate and effectively implement the tobacco control measures contained in the WHO FCTC.

[i] SEATCA. Tobacco Industry Interference in Tobacco Tax Policies. 2021. https://bit.ly/3qjo5F3
[ii] SEATCA. Tobacco Tax Index. May 2021. https://bit.ly/36ajnT2
[iii] SEATCA. Ending unfair contract with the tobacco industry in Lao PDR. 15 Sep 2021  https://www.youtube.com/watch?v=mV6PXHRaNwY
[iv] SEATCA. Asian State-Owned Tobacco Enterprises. Southeast Asia Tobacco Control Alliance. 2019. Available from: https://bit.ly/3yUJLwm
[v] SEATCA. Tobacco Industry Interference. Available from: https://bit.ly/3HuFXUN